Transparency ought to be welcomed by the professions
It is a great pity that professional bodies/institutions only move forward when forced, or threatened, by legislation. The reaction by the Irish Stock Exchange (ISE), and the Institute of Directors, to proposals by the Irish Association of Investment Managers (IAIM), on detailed disclosure of directors' remuneration, typifies the approach adopted by such bodies. Instead of welcoming the proposals as a further step towards greater transparency, the ISE said, it would examine the new guidelines, and also the comments by the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney who warned that she would bring in legislation to force disclosure, if the guidelines are not adopted. The Institute of Directors merely said "anything the Minister says will be looked at very carefully".
Both bodies will, of course, have to formally consider the proposed new guidelines, but both have been sharply opposed to greater disclosure. However, they should have seen the light before now and joined in the movement towards greater transparency.
Now the ISE will have to stitch these into its rules as part of its listing requirements. But that will be viewed as a reluctant move.
There has been similar foot-dragging by the accountancy profession. The present probe into alleged professional misconduct by some members of the Institute of Chartered Accountants in Ireland is being held in private. But following pressure from Ms Harney, she has a representative in attendance. Also, the accountants have been forced to change their by-laws which will now allow disciplinary meetings to be held in public in the future. That is unless its disciplinary committee decides against such public meetings because it would be prejudicial to the defendants. And the endorsement of the new rules by over 90 per cent of the institute's members must be a good augury for the future.
Against that background, the move initiated by IAIM is a positive one. It is not long ago that some of its members did not think greater disclosure of directors' remuneration was important. AIMI's new stance has to be warmly welcomed.
The objections cited against greater disclosure of directors' remuneration, have always been spurious. These included the "peeping Tom" syndrome. Surprisingly, typifying that approach, one company director told The Irish Times last week that providing information on individual director' remuneration "would simply indulge the prurient interest of the public". Hopefully that is an isolated view. But the excuse mostly used by the objectors was that such disclosures would identify wealthy people and create security problems for them. Those objectors failed to say that those high profile people who were kidnapped, such as the family of Mr Jim Lacey of NIB, never had their remuneration disclosed and that they were targeted for different reasons. Also, those abducted tended to be proprietors of small cash-flow businesses. Those objections never did not stand up to scrutiny, and always had a distinctly hollow ring about them.
The ISE in defending its stance said the existing rules go further than company law requirement and also noted said London was the only exchange in Europe which had such demanding disclosure rules. That is true but who wants to follows continental Europe which is way behind in transparency. In any event, Irish publicly quoted companies which are among the world leaders, should emulate, or surpass, what is best. That means doing what the British and US companies do. It is obviously ridiculous when a Northern Ireland company, such as Ulster Television, gives a precise breakdown of individual director's remuneration when the Republic's leading companies only give an aggregation of directors' remuneration.
Indeed, the practice of lumping the remuneration got AIB into deep trouble in 1995 because an averaging of the figures showed the five executive directors getting an average pay rise of £165,000 each in the previous year. This, of course, was inflated by the inclusion of the remuneration paid to its US executive. AIB now discloses the US remuneration separately but still lumps the remaining remuneration. Clearly this is done for the bank's own selfish interests and not for its shareholders, customers, or indeed any other interested parties. Those in favour of getting rid of the heads-in-the-sand stance would have to agree with Ms Harney who said: "if the Taoiseach has to disclose his financial affairs, it is not reasonable for directors of public companies to be excluded from a regime of openness, transparency and accountability".
But Irish publicly quoted companies could go further by publishing quarterly figures. It is ludicrous that the US subsidiaries of companies do precisely that while their parents merely dollop out two parcels of figures - interim and final - a year.